ENERPAC TOOL GROUP CORP

Previous wording

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions provider serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. Enerpac Tool Group's businesses are global leaders in providing high pressure hydraulic tools, controlled force products and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Milwaukee, Wisconsin. The Company has one reportable segment, the Industrial Tools & Services Segment ("IT&S"). The IT&S segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the refinery/petrochemical; general industrial; industrial maintenance, repair and operations (“MRO”), machining & manufacturing; power generation, infrastructure, mining and other markets. Financial information related to the Company's reportable segment is included in Note 12,“Segment Information” in the notes to the condensed consolidated financial statements. The Company has an Other operating segment, which does not meet the criteria to be considered a reportable segment.

Current wording

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions provider serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. Enerpac Tool Group's businesses are global leaders in providing high pressure hydraulic tools, controlled force products and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Milwaukee, Wisconsin. The Company has one reportable segment, the Industrial Tools & Service Segment ("IT&S"), and an Other operating segment, which does not meet the criteria to be considered a reportable segment. The IT&S segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the refinery/petrochemical; general industrial; industrial maintenance, repair and operations (“MRO”), machining & manufacturing; power generation, infrastructure, mining and other markets. Financial information related to the Company's reportable segment is included in Note 11,“Segment Information” in the notes to the condensed consolidated financial statements.

Previous wording

Our long-term goal is to create sustainable returns for our shareholders through above-market growth in our core business, expanding our margins, generating strong cash flow, and being disciplined in the deployment of our capital. We intend to grow through execution of our organic growth strategy, focused on key vertical markets that benefit from long-term macro trends, driving customer driven innovation, expansion of our digital ecosystem to acquire and engage customers, and an expansion in emerging markets such as Asia Pacific. In addition to organic growth, we also focus on margin expansion through operational efficiency techniques, including lean, continuous improvement and 80/20, to drive productivity and lower costs, as well as optimizing our selling, general and administrative expenses through consolidation and shared service implementation. We also apply these techniques and pricing actions to offset commodity increases and inflationary pricing. Finally, cash flow generation is critical to achieving our financial and long-term strategic objectives. We believe driving profitable growth and margin expansion will result in cash flow generation, which we seek to supplement through minimizing primary working capital. We intend to allocate the cash flow that results from the execution of our strategy in a disciplined way toward investment in our businesses, maintaining our strong balance sheet, disciplined M&A and opportunistically returning capital to shareholders. We anticipate the compounding effect of reinvesting in our business will fuel further growth and profitable returns.

Current wording

Our long-term goal is to create sustainable returns for our shareholders through above-market growth in our core business, expanding our margins, generating strong cash flow, and being disciplined in the deployment of our capital. We intend to grow through execution of our organic growth strategy, focused on key vertical markets that benefit from long-term macro trends, driving customer driven innovation, expansion of our digital ecosystem to acquire and engage customers, and an expansion in emerging markets such as Asia Pacific. In addition to organic growth, we also focus on margin expansion through operational efficiency techniques, including lean, continuous improvement and 80/20, to drive productivity and lower costs, as well as optimizing our selling, general and administrative expenses through consolidation and shared service implementation. We also apply these techniques and pricing actions to offset commodity increases and inflationary pricing. Finally, cash flow generation is critical to achieving our financial and long-term strategic objectives. We believe driving profitable growth and margin expansion will result in cash flow generation, which we seek to supplement through minimizing primary working capital. We intend to allocate the cash flow that results from the execution of our strategy in a disciplined way toward investment in our businesses, maintaining our strong balance sheet, disciplined M&A program and opportunistically returning capital to shareholders. We anticipate the compounding effect of reinvesting in our business will fuel further growth and profitable returns.

Previous wording

The following table sets forth our results of continuing operations (dollars in millions, except per share amounts):

Current wording

The following table sets forth our results of operations (dollars in millions, except per share amounts):

Previous wording

(1)Results are from continuing operations and exclude the financial results of previously divested businesses reported as discontinued operations. The summation of the individual components may not equal the total due to rounding. Period to period differences between line items included in the table may differ from the amount presented below due to rounding.

Current wording

(1)The summation of the individual components may not equal the total due to rounding. Period to period differences between line items included in the table may differ from the amount presented below due to rounding.

Previous wording

Consolidated net sales for the three months ended May 31, 2025 were $159 million an increase of $8 million, or 6%, compared to the prior-year comparable period. The effect of the weakening U.S. dollar on foreign currency rates compared to the prior-year period favorably impacted sales by $1 million, or 1%, and the first quarter acquisition of DTA favorably impacted sales by $5 million, or 3%. This resulted in an organic sales growth of approximately 2% in the quarter. Management refers to sales adjusted to exclude the impact of these items (foreign currency changes and recent acquisitions and divestitures) as "organic sales". In the three months ended May 31, 2025, product sales grew $7 million, or 6%, while foreign currency favorably impacted sales by $1 million, or 1%, and the acquisition of DTA (which falls under our Heavy Lifting Technology ("HLT") product line within the product sales activity) favorably impacted product sales by $5 million, or 4%, resulting in organic product sales growth of 1% over the prior-year quarter. In the third quarter of fiscal 2024 we saw net sales recovery in our Other product sales from the temporary shipment delays related to contract negotiations that impacted the second quarter of fiscal 2024. Even with this recovery in the third quarter of fiscal 2024, in the third quarter of fiscal 2025, we saw strong year-over-year growth at $1 million, or 19%. Service sales were up $1 million, or 3%, year-over-year, with a minimal unfavorable impact of foreign currency; therefore, organic sales growth was also 3%. Gross profit as a percent of sales decreased to 50.4%, compared to 51.8% in the third quarter of fiscal 2024; the decrease in gross profit margin is due to continued pressure in our service business and the inclusion of DTA. Operating profit for the third quarter of fiscal year 2025 was $32 million, a decrease of $2 million compared to the third quarter of fiscal 2024. The decrease in operating profit was mainly driven by the increase in restructuring expense which was partially offset by the gross profit increase resulting from the year-over-year sales increase.

Current wording

Consolidated net sales for the three months ended November 30, 2025 were $144 million, a decrease of $1 million, or 1%, compared to the prior-year comparable period. The effect of the weakening U.S. dollar on foreign currency rates compared to the prior-year period favorably impacted sales by $3 million, or 2%. This resulted in an organic sales decline of approximately 2% in the quarter. Management refers to sales adjusted to exclude the impact of foreign currency changes and recent acquisitions and divestitures as "organic sales". In the three months ended November 30, 2025, product sales grew $7 million, or 7%, while foreign currency favorably impacted sales by $2 million, or 2%, resulting in organic product sales growth of 5% over the prior-year quarter. Service sales were down $8 million, or 25%, year-over-year, with a favorable impact of foreign currency of $1 million, or 2%, resulting in an organic service sales decline of 26%. Gross profit as a percent of sales decreased to 50.7%, compared to 51.4% in the first quarter of fiscal 2025; the decrease in gross profit margin is due to continued pressure in our service business, primarily in the United Kingdom market, and higher tariff-driven costs flowing through cost of goods sold. Operating profit for the first quarter of fiscal year 2026 was $28 million, a decrease of $3 million compared to the first quarter of fiscal 2025. The decrease in operating profit was mainly driven by the declines in our service business, primarily in the United Kingdom market, and higher tariff-driven costs flowing through cost of goods sold.

Previous wording

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including refinery/petrochemical; general industrial; industrial MRO; machining & manufacturing; power generation; infrastructure; mining; and other markets. Our primary products include branded tools, cylinders, pumps, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and other tools (Product product line). The segment provides maintenance and manpower services on customer assets to meet their specific needs and rental services for certain of our products (Service & Rental product line). The following table sets forth the results of operations for the IT&S segment (dollars in millions):

Current wording

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including refinery/petrochemical; general industrial; industrial MRO; machining & manufacturing; power generation; infrastructure; mining; and other markets. Its primary products include branded tools, cylinders, pumps, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and other tools (Product product line). The segment provides maintenance and manpower services to meet customer-specific needs and rental capabilities for certain of our products (Service & Rental product line). The following table sets forth the results of operations for the IT&S segment (dollars in millions):

Previous wording

Corporate expenses were $11 million and $9 million for the third quarter of fiscal 2025 and 2024, respectively, and were $28 million and $26 million for the nine months ended May 31, 2025 and 2024, respectively. The increase in expense in the third quarter was driven by higher personnel charges.

Current wording

Corporate expenses were $9 million and $8 million for the three months ended November 30, 2025 and 2024, respectively. The increase in expense was driven by higher personnel charges and growth investments.

Previous wording

Net financing costs were $2 million and $3 million in the three months ended May 31, 2025 and 2024, respectively. For the nine months ended May 31, 2025 and 2024, net financing costs were $8 million and $11 million, respectively. Financing costs decreased due to a mix of lower debt balances and lower interest rates.

Current wording

Net financing costs were $2 million and $3 million in the three months ended November 30, 2025 and 2024, respectively. Financing costs decreased due to lower debt balances and interest rates.

Previous wording

The Company's global operations, acquisition activity (as applicable) and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings before income taxes, income tax expense and effective income tax rates from continuing operations are as follows (dollars in millions):

Current wording

The Company's global operations, acquisition activity (as applicable) and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings before income taxes, income tax expense and effective income tax rates are as follows (dollars in millions):

Previous wording

The Company’s earnings from continuing operations before income taxes include earnings from both U.S. and foreign jurisdictions. As several foreign tax rates are higher than the U.S. tax rate of 21%, the annual effective tax rate is impacted by foreign rate differentials, withholding taxes, losses in jurisdictions where no benefit can be realized, and various aspects of the U.S. Tax Cuts and Jobs Act, such as the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income provisions.

Current wording

The Company’s earnings before income taxes include earnings from both U.S. and foreign jurisdictions. As several foreign tax rates are higher than the U.S. tax rate of 21%, the annual effective tax rate is impacted by foreign rate differentials, withholding taxes, losses in jurisdictions where no benefit can be realized, and key international provisions enacted from recent tax legislation, such as the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income provisions.

Previous wording

The effective tax rate for the three months ended May 31, 2025 was 22.2%, compared to 23.1% for the comparable prior-year period. The effective tax rate in each time period was impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The lower effective tax rate for the three months ended May 31, 2025 was primarily driven by the more favorable impact of uncertain tax position releases related to statute expirations and lower withholding tax related to current year distributions in comparison to the prior period. Both the current and prior-year period effective income tax rates include the impact of non-recurring items.

Current wording

The effective tax rate for the three months ended November 30, 2025 was 25.1%, compared to 22.1% for the comparable prior-year period. The effective tax rate in each time period was impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The higher effective tax rate for the three months ended November 30, 2025 was primarily driven by the more favorable tax impact of stock compensation in the prior period as compared to the current period. Both the current and prior-year period effective income tax rates include the impact of non-recurring items.

Previous wording

At May 31, 2025, we had $141 million of cash and cash equivalents, of which $107 million was held by our foreign subsidiaries and $34 million was held domestically. The following table summarizes our cash flows provided by operating, investing and financing activities (dollars in millions):

Current wording

At November 30, 2025, we had $139 million of cash and cash equivalents, of which $100 million was held by our foreign subsidiaries and $39 million was held domestically. The following table summarizes our cash flows provided by operating, investing and financing activities (dollars in millions):

Previous wording

Net cash used in investing activities was $43 million and $8 million for the nine months ended May 31, 2025 and 2024, respectively. This increased use of cash was due to the payment of $27 million for the acquisition of DTA and increased capital expenditures relating to build-out costs for the Company's new headquarters location in Milwaukee.

Current wording

Net cash used in investing activities was $4 million and $33 million for the three months ended November 30, 2025 and 2024, respectively. This decreased use of cash was primarily due to the $27 million payment made for the DTA acquisition in the first quarter of fiscal 2025.

Previous wording

Net cash used in financing activities was $40 million and $51 million for the nine months ended May 31, 2025 and 2024, respectively. The $11 million decrease in net cash used in financing activities for the nine months ended May 31, 2025 was driven by $17 million of higher net revolver and term loan payments and $4 million of lower share repurchases due to fewer shares being repurchased in the current-year period, partially offset by $7 million less in taxes paid with respect to equity awards, net of proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities was $23 million and $13 million for the three months ended November 30, 2025 and 2024, respectively. The $10 million increase in net cash used in financing activities for the three months ended November 30, 2025 was driven by higher share repurchases in the current-year period.

Previous wording

At May 31, 2025, there were no borrowings and $398 million available under the revolving line of credit facility after reduction for $2 million of outstanding letters of credit issued under the senior credit facility. The Company was in compliance with all covenants under the senior credit facility at May 31, 2025.

Current wording

At November 30, 2025, there were no borrowings and $400 million available under the revolving line of credit facility. The Company was in compliance with all covenants under the senior credit facility at November 30, 2025.

Previous wording

Given our desire to allocate cash flow and revolver availability to fund growth initiatives, we have historically leased most of our facilities and some operating equipment. We lease certain facilities, computers, equipment and vehicles under various operating lease agreements, generally over periods ranging from one to twenty years. Under most arrangements, we pay the property taxes, insurance, maintenance and expenses related to the leased property. Many of our leases include provisions that enable us to renew the

Current wording

Given our desire to allocate cash flow and revolver availability to fund growth initiatives, we have historically leased most of our facilities and some operating equipment. We lease certain facilities, computers, equipment and vehicles under various operating lease agreements, generally over periods ranging from one to twenty years. Under most arrangements, we pay the property taxes, insurance, maintenance and expenses related to the leased property. Many of our leases include provisions that enable us to renew the leases at contractually agreed rates or, less commonly, based upon market rental rates on the date of expiration of the initial leases.

Previous wording

We had outstanding letters of credit of$6 million and surety bonds of$4 million at May 31, 2025 and$4 million of letters of credit and$4 million of surety bonds at August 31, 2024, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

Current wording

We had outstanding letters of credit of$7 million and surety bonds of$5 million at November 30, 2025 and$6 million of letters of credit and$5 million of surety bonds at August 31, 2025, the majority of which relate to commercial contracts and self-insured workers' compensation programs.